With US sanctions, India has perfect window of opportunity for defence deals with Vietnam

Nirmala Sitharaman’s visit could not have been better timed, with US bringing in CAATSA and complicating defence ties between Russia and Vietnam.

For the Vietnamese government, defence ties are a cornerstone of the relationship with India. So, the substantive movement on weapons sales and co-production initiatives shown by Defence Minister Nirmala Sitharaman during her recent visit is long overdue.

Sitharaman said “this is the best time for us to come here with the technologies we have”.

It is a demonstration that India is indeed serious about ‘Acting East’.

But Vietnam hasn’t exactly been lacking suitors either, with Russia being its current top supplier and the United States wooing it constantly. But, with the US bringing into force the ‘Countering America’s Adversaries Through Sanctions Act’ (CAATSA) — a move that is likely to mount secondary sanctions on nations dealing with Russia in defence and energy — a window of opportunity has opened for India.

India can hope to corner a significant share of the Vietnamese defence market since Hanoi will now be circumspect about turning towards American arms susceptible to sanctions, even as it goes slow on new Russian military imports till it is able to put in place CAATSA workarounds.

Whether India is able to take advantage of this opportunity will, of course, depend on its ability to overcome legacy issues constraining exports and offer genuine value to the Vietnamese.

Overall, military exchanges between India and Vietnam are quite robust, with the two sides conducting their first-ever bilateral land warfare and naval exercises respectively earlier this year.

Vietnam, which is under maritime pressure from China’s revanchist activities in the South China Sea (SCS), wants India to deepen its military engagement further and sees defence industrial ties as a key component of the same.

India is also involved in various training programs, besides helping Vietnam augment its cyber capabilities.

During her visit, Sitharaman attended the ground break ceremony of the Army Software Park in Nha Trang that is being built with Indian financial support to the tune of $5 million.

These relationships have not only given India an insight into Vietnamese defence requirements but have also served to underpin the trust between the two sides.

Given India’s own energy interests in Vietnam, as well as the need to uphold freedom of navigation in the SCS, bolstering Vietnamese defence capabilities makes strategic sense for India.

Convergent interests coupled with Vietnam’s rising military expenditure means that India can build its own position in the global arms market by focusing on Vietnam. At the moment, Indian defence transfers to Vietnam include the supply of some ten patrol boats by L&T, with the sale facilitated by a $100 million line of credit (LoC) extended by India, as well as upgrade packages for Vietnam’s Russian-origin Petya Class Surface Combatants.

Given the pool of common Russian origin equipment operated by India and Vietnam, Indian companies that are upgrading such equipment domestically can now see Vietnam as a future customer for similar services.

The commonality in military platforms also suggests that the Indian and Vietnamese militaries have the potential to attain a high degree of interoperability. But interoperability requires connective tissues in the form of joint communications security (COMSEC) equipment. In that light, Bharat Electronics Limited’s (BEL) opening of a representative office in Hanoi during Sitharaman’s visit assumes significance since the Vietnamese seem interested in inducting Indian-origin COMSEC and sensor equipment such as radars.

Vietnam also wants offensive strike systems such as the Brahmos anti-ship cruise missile to credibly deny Chinese access to its waters. However, India has been unable till date to execute a Brahmos sale due to the fact that key sub-systems of the missile such as the radio frequency seeker are imported from Russia. But this is changing now, with India recently testing an indigenous seeker for the Brahmos which may be offered with Brahmos export units in the future.

But even with predominantly indigenous weapons such as the Akash surface-to-air missile, which is also on offer to Vietnam, India will have to demonstrate more value than the Russians in terms of superior industrial partnerships that lead to significant work-share for Vietnam. Incidentally, during the visit, Sitharaman spoke about co-production and export from Vietnamese soil, presumably to other ASEAN nations. Accompanying her, were a number of Indian companies looking to further business-to-business ties with their Vietnamese counterparts. Such ties will be crucial to managing life-cycle costs for any future Indian-supplied equipment.

Her visit could not have been better timed, with CAATSA bringing US unilateralism to the fore and complicating defence ties between Russia and Vietnam.

Saurav Jha has studied Economics from Presidency College, Calcutta and Jawaharlal Nehru University, New Delhi. He is a former consultant to FICCI’s International Division and Chief Editor of Delhi Defence Review. His Twitter handle is @SJha1618

1 COMMENT

We are unable to fund our own requirements for our defence forces. Our Ordnance factories are outdated, corruption ridden, and obsolete. This Govt has still not implemented a clear cut policy for the private sector participating in defence equipment. Sitharamans visit is anon starter just like all her earlier, publicity seeking adventures.